KPMG survey: Manufacturers focused on cost management, innovation for growth

June 4, 2012

Global manufacturing executives, increasingly optimistic about the outlook for business over the next two years despite austerity measures, have looked to cost management and innovation for growth, according to a KPMG study.

The study, the 2012 Global Manufacturing Outlook: Fostering Growth Through Innovation, polled 241 senior, global manufacturing executives in order to determine the potential growth model for the sector in coming years.

The U.S. is expected to lead growth in the global manufacturing sector, as a revamped business strategy will push the American industry to the top.

"Manufacturers may be optimistic about the business environment over the next few years, but they are challenged with continued price volatility on cost inputs, risk in the supply chain, and uncertain demand," said Jeff Dobbs, KPMG's global head of Diversified Industrials. "As such, companies must continue to seek opportunities to optimize business operations and squeeze costs out of the process to maximize revenue and profits."

According to the study, a total of 44 percent of U.S. executives indicated that their companies will increase investment in innovation and research and development, and this areas have been targeted as the main vehicle for growth in the sector.

Progress is already being seen in these areas, as 84 percent of U.S. manufacturing executives feel that the innovation wave is underway, and will continue to increase its momentum in the coming years.

"After several years spent cutting costs, many manufacturers realize that they can't afford to sit back and wait. They must deploy capital to develop the products that could give them a competitive advantage," said Dobbs.

Manufacturing business strategy is becoming more service-oriented, as an increased focus on provisions of development and maintenance contracts, along with other collaborative services, is giving firms a new way to gain a competitive advantage, according to the study.

The U.S. manufacturing sector is also benefiting from the return of jobs from China back to America, as the International Business Times reported that several industries are leading a reshoring trend.

According to the news outlet, increased labor costs in China, greater efficiency in U.S. manufacturing operations and rising shipping expenditures are motivating companies to come back from the Asian continent.

Ocean shipping from China, Richard Phillips, chief executive of Pilot Freight Services, noted "could involve days or a couple of weeks, depending on what you are trying to do and what your cost parameters are."